Externalities in a Life-Cycle Model with Endogenous Survival
Alexia Fürnkranz-Prskawetz and
No 1001, VID Working Papers from Vienna Institute of Demography (VID) of the Austrian Academy of Sciences in Vienna
We study socially vs. individually optimal lifecycle allocations of consumption and health care, when individual health expenditure curbs own mortality but also has a spillover effect on other persons' survival. Such spillovers arise, for instance, when health care activity at aggregate level triggers improvements in treatment through learningbydoing (positive externality) or a deterioration in the quality of care through congestion (negative externality). We combine an agestructured optimal control model at population level with a conventional lifecycle model to derive the social and private value of life. We then examine how individual incentives deviate from social incentives and how they can be aligned by way of a transfer scheme. The agepatterns of socially and individually optimal health expenditure and the transfer rate are derived. Numerical analysis illustrates the workings of our model.
Keywords: Demand for health; externality; life-cycle-model; optimal control; tax-subsidy; value of life. (search for similar items in EconPapers)
Pages: 35 pages
New Economics Papers: this item is included in nep-hea
References: Add references at CitEc
Citations: View citations in EconPapers (8) Track citations by RSS feed
Downloads: (external link)
http://www.oeaw.ac.at/fileadmin/subsites/Institute ... Papers/WP2010_01.pdf
Journal Article: Externalities in a life cycle model with endogenous survival (2011)
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:vid:wpaper:1001
Access Statistics for this paper
More papers in VID Working Papers from Vienna Institute of Demography (VID) of the Austrian Academy of Sciences in Vienna
Bibliographic data for series maintained by Frank Kolesnik ( this e-mail address is bad, please contact ).